Technological development is optimal for Russian coal industry

20 september 2016

“For the Russian coal industry to go green and opt for intensive technological development may be the best strategy we can choose,” Analytical Center’s expert Irina Pominova said speaking at a round table organized by the Izvestia newspaper and entitled “Greening of the Russian Coal Industry in the Context of the Paris Agreement on Climate Change.”

Irina Pominova dwelt on the potential consequences of
implementing the Paris Agreement to the coal industry, which is more intensive
in terms of carbon emissions that any other energy sources. However, coal
remains the second largest energy source in the world accounting for up to 30%
of primary energy consumption.

In the past few years, with the exception of 2015, Russian
coal industry’s development was leaning heavily on exports, the share of
exports in production growing from 33% to 41% since 2011. The prospects for
further development and expansion are also mainly associated with export
potential, specifically in the direction of the East: Russian coal exports to
the West will at best remain the same.

“Even the preparation process to the last year’s climate
change conference started putting pressure on the coal industry,” Ms. Pominova
noted. - “This had to do first and foremost with the largest global donors
refusing to support coal mining projects. This decision was made, among others,
by the US, the Nordic countries, Britain, the Netherlands, Germany, and France,
as well as development banks - the World Bank, the European Investment Bank,
and the EBRD. Refusals continue to come even now, this time on the part of the
largest private banks.”

How will this affect Russian export potential given the fact
that these decisions were made by western countries where the tendency to
reduce coal consumption is evident and taken into account? The first option
here is to use the support channels for coal projects in the developing world -
western countries’ financial assistance accounts for approximately 7% of
investments there. However, the Paris Agreement does affect the energy policy
of the developing countries as well. At the global market, this is especially
noticeable when we look at China’s decision to optimize its coal industry,
China being the largest coal consumer in the world accounting for almost a half
of the global demand.

“A reduction of the global demand for coal may be quite
significant, especially in the long term,” the expert believes. - ‘‘Which means
that despite the current partial recovery in the coal industry with the prices
regaining some strength, large export oriented coal projects can only be
realized with a very thorough and convincing due diligence and rationale.”